E-Commerce in a Post-Pandemic World

Weekly updates on the innovation economy.


In this week’s newsletter, we explore the following 3 topics:

  • Historical growth and trends in e-commerce

  • The rise in cashless payments

  • The future of e-commerce in the coming decade ahead 

Additionally, Drawing Capital partnered with Interactive Brokers to present a webinar recently about e-commerce in a post-pandemic world. The website link to the recording of the webinar and the presentation slide deck can be found here: https://ibkrwebinars.com/webinars/e-commerce-in-a-post-pandemic-world/

Federal Reserve Data about E-Commerce Activity

For the past 20 years, e-commerce retail sales have experienced a steady upward climb, both in numeric terms and as a percentage of total retail sales. Reviewing the charts below, the coronavirus crisis and the subsequent lockdown orders in America caused a spike in e-commerce retail sales. 

From Q4 2000 to Q4 2020, America’s e-commerce retail sales cumulatively grew a whopping 2447%.

2020 ETF Performance

As displayed in the chart below, ETFs related to e-commerce and fintech both generated large positive returns that significantly outperformed the S&P 500 Index in calendar year 2020.

Positive Trend towards Cashless Payments

According to McKinsey & Company, there has been an increase in the percentage usage of cashless transactions in both emerging market countries and mature modernized countries. Among the cohort of emerging market countries, China has been the biggest adopter of digital and cashless payments over the past decade. Possible reasons for China’s significant adoption of digital payments include the following:

  • The rise of AliPay and WeChat Pay

  • Competition with crypto payments

  • Rise of contactless payments due to the ongoing coronavirus health crisis 

  • Chinese consumer willingness to adopt digital payments and enjoy its benefits

  • High popularity in the use of QR codes in China

  • Chinese governmental push into digital transactions and fintech innovation

  • Significant Chinese e-commerce economy that is measured in the trillions of dollars

  • Significant advancement in technological and financial infrastructure by both Chinese governmental agencies and large Chinese fintech firms

  • Desire to make the Chinese Yuan a more attractive currency that may compete as a secondary global reserve currency

Visualization of a Security Workflow in an Online Purchase

The following illustration is a sample security workflow for e-commerce purchases and online payments. This visualization is from the Province of Ontario’s Ministry of Economic Development and Innovation. 

Future of E-Commerce

Big Trends in E-Commerce & Payments

Role of Robots

  • The rising adoption of robotics in manufacturing, packaging, and delivery will help facilitate greater recognition of efficiencies. 

  • Within robotics for warehouses, there are 2 high-growth areas that can drive output expansion, improve productivity, and reduce costs and inefficiencies. These 2 high-growth areas are conventional robots and collaborative robots (“cobots”). Additionally, software-based automation can further enhance warehouse productivity and efficiency. 

  • Due to coronavirus restrictions on the number of high-density workers in a warehouse, the usage of robots is necessary to facilitate and enhance labor productivity. 

  • As barriers to entry decline, as variable costs decrease, and as innovation accelerates, market research firm ABI Research estimates that over 50,000 warehouses worldwide are expected to use commercial robotics by 2025.

Digital Wallets and Research from the FIS Worldpay February 2021 Report

  • 2020 was the first year that digital wallet usage exceeded the utilization of cash for in-store point-of-sale payments. 

  • In France, Norway, Sweden, Australia, Canada, and the UK, the use of cash for in-store payments fell by 50% or more. In America, the amount of cash payments for in-store payments declined from $1.4 trillion in 2019 to $1 trillion in 2020.  

  • Adoption of buy-now, pay-later (BNPL) is estimated to double in North America and Europe by 2024.

  • Digital wallets are estimated to be 50% or more of all e-commerce payments worldwide by 2024.

  • Total e-commerce spending in 2020 was worth about $4.6 trillion in value. Estimates suggest that this number could increase to $7.3 trillion or more in value by 2024.

  • Mobile commerce and social commerce, combined with changing consumer preferences, continue to drive greater e-commerce adoption and greater e-commerce spending. 

Research from Bank of International Settlements 

In the research paper titled E-commerce in the Pandemic and Beyond from the Bank of International Settlements that was published in January 2021, the authors articulated a range of insightful quotes:

  • “The growth of e-commerce has been higher in countries where there were more stringent containment measures and where e-commerce was initially less developed”. For example, “In Latin America, one of the regions with the lowest penetration of e-commerce, in just two months consumers on the MercadoLibre platform made the number of purchases they usually did in a year”.

  • “Some changes in consumers’ shopping habits and payment behavior may be longer-lasting. This may have implications for structural change and the growth of the digital economy”.

  • “The pandemic has intensified a “catching-up” process in e-commerce growth among countries. Prior to the pandemic, there was a strong correlation between e-commerce revenues to GDP and the innovation capacity of an economy.”

  • “Interestingly, the growth has been higher where e-commerce was less developed. The lower the level of e-commerce in a given country in 2019, the higher its growth rate during the Covid-19 pandemic. This implies that countries with very low e-commerce volumes have been catching up”.

  • “Changes in consumer behavior may be long-lasting. For large parts of the population, the closure of physical stores has forced consumers to question deep-seated shopping habits. In a sample of 18 countries, a rising share of adults expects to shop online more frequently after the pandemic”.

This research paper also included the following charts:

As displayed in the chart above, web traffic for groceries rapidly increased when coronavirus-induced lockdowns began in America, while tourism-related web traffic collapsed in March-June 2020.

The coronavirus crisis caused a significant surge in card-not-present (CNP) transactions, particularly as hundreds of millions people obeyed the stay-at-home governmental orders, which led to a rise in online ordering of products, services, groceries, and food. 

In the chart below, it appears that the recent surge in online shopping is not a short-term coronavirus-induced phenomenon and actually speaks to a long-term continued trend. Particularly, younger demographics have higher familiarity and comfort with online shopping. As consumer experiences become faster, better, cheaper, more convenient, and more reliable when shopping online, it’s natural for e-commerce penetration as a percentage of total sales to increase over time. 

3 Evolutions of Commerce

Examples of Invention & Creation in E-commerce and Payments

  • 2 factor authentication for user trust and security

  • Digital wallets (Apple Pay, AliPay, Google Pay, etc.)

  • Credit cards and debit cards

  • PayPal and sending money online

  • In 1991, regulatory reform allowed e-commerce to exist

  • In 1992, the first text message was sent (2 factor authentication often uses text messages)

  • API-based online payment infrastructure via Stripe 

Examples of Optimization & Convenience in E-Commerce and Payments 

  • Buy now, pay later (BNPL)

  • DoubleClick, advertising, and auction-style advertising bidding

  • Subscription membership services that promote customer loyalty, such as Costco annual membership, Amazon Prime membership, and DoorDash’s DashPass

  • Free shipping

  • Consistency and repeatability of service

  • Delightful online experiences with good user interfaces to reduce friction in completing purchases online

  • Easy return policies

  • Uses of custom login credentials to save account info, credit card info, and shipping addresses, which reduce friction for consumers when making new purchases and allows the e-commerce provider to learn more about their individual customers

Closing Thoughts

  • The totality of consumer expenditure is measured in the trillions of dollars annually and represents the majority of America’s GDP. 

  • Consumer spending has increased with mobile-friendly shopping apps, subscription service business models, social media algorithms that amplify and recommend products and services to consumers, and the concept of the “buy now, pay later” phenomenon.

  • The e-commerce tailwind for numerous companies will continue because e-commerce can increase price uniformity, provide more transparency and information to consumers in a decentralized method with the internet, make online prices more sensitive to change due to competitive forces, and alter the price level of certain products and services for the benefit of consumers. 

  • Across major countries, there is a repeated trend towards cashless payments in transactions, which can be measured as a decreasing percentage of cash used in payment transactions by volume.

  • When e-commerce provides a cheaper, faster, and more convenient experience to consumers, then consumers will increasingly choose e-commerce in lieu of in-person commerce. 

  • A combination of both invention and optimization in the e-commerce ecosystem will continue to drive increasing e-commerce market penetration as a percentage of total sales.

  • E-commerce purchases are increasingly being made on mobile devices. As a result, it has now become necessary for retailers to have a comprehensive and competitive e-commerce strategy with an excellent user experience on mobile devices. 

  • Social commerce and improved consumer experiences on mobile devices are driving the next wave of e-commerce spending. 

  • Companies that are combining a social element to e-commerce with the use of paid digital advertising and “influencers” are seeking faster sales growth and user engagement, particularly in clothing and beauty products. 

  • For businesses, technology is no longer just a sector; technology already has or will proliferate across all economic sectors. In times of crisis, the demand for innovation is high because innovation solves real problems and changes the status quo. 

  • Online travel booking was the among the first wave in the proliferation of e-commerce. Online purchasing of consumer electronics, groceries, clothing, common household products, and more are increasing over time.

  • As people’s comfort level with technology increases, online spending and cashless transaction volume should increase in intensity for existing products and expand the variety of goods and services being bought on e-commerce platforms.



(1) "Accelerating winds of change in global payments - McKinsey." 1 Oct. 2020, https://www.mckinsey.com/industries/financial-services/our-insights/accelerating-winds-of-change-in-global-payments. Accessed 2 Mar. 2021.

(2) "E-Commerce Retail Sales as a Percent of Total Sales ... - FRED." https://fred.stlouisfed.org/series/ECOMPCTSA. Accessed 2 Aug. 2021.

(3) "E-Commerce Retail Sales (ECOMSA) | FRED | St. Louis Fed." https://fred.stlouisfed.org/series/ECOMSA. Accessed 2 Aug. 2021.

(4)  "Key Trends to Drive Your Payments Strategy - JP Morgan." 1 Feb. 2021, https://www.jpmorgan.com/content/dam/jpm/merchant-services/insights/e-commerce/key-trends-to-drive-your-payments-strategy.pdf. Accessed 2 Mar. 2021.

(5)  "E-commerce in the pandemic and beyond - Bank for International ...." 12 Jan. 2021, https://www.bis.org/publ/bisbull36.pdf. Accessed 2 Mar. 2021.

(6)  "Social Commerce 2021 - Insider Intelligence Trends ... - eMarketer." 3 Feb. 2021, https://www.emarketer.com/content/social-commerce-2021. Accessed 2 Mar. 2021.

(7) "Social Commerce Market Size Worth $3,369.8 Billion By 2028." https://www.grandviewresearch.com/press-release/global-social-commerce-market. Accessed 2 Mar. 2021.

(8)  "ARK Fintech Innovation ETF (ARKF) Performance - ARCX ...." https://www.morningstar.com/etfs/arcx/arkf/performance. Accessed 2 Mar. 2021.

 (9) "E-Commerce: Purchasing and Selling Online –." http://www.gov.pe.ca/photos/original/IPEI_ebiz_ecomm.pdf. Accessed 2 Mar. 2021.

(10) "Digital Wallets Eclipse Cash Globally at Point of Sale for First Time ...." 24 Feb. 2021, https://www.businesswire.com/news/home/20210224005222/en/Digital-Wallets-Eclipse-Cash-Globally-at-Point-of-Sale-for-First-Time-During-Pandemic-FIS-Study-Finds. Accessed 2 Mar. 2021.

(11) "Social Commerce Market Share Report, 2021-2028." https://www.grandviewresearch.com/industry-analysis/social-commerce-market. Accessed 2 Mar. 2021.

(12) "50,000 Warehouses to Use Robots by 2025 as Barriers to Entry Fall ...." 26 Mar. 2019, https://www.abiresearch.com/press/50000-warehouses-use-robots-2025-barriers-entry-fall-and-ai-innovation-accelerates/. Accessed 2 Mar. 2021.

This letter is not an offer to sell securities of any investment fund or a solicitation of offers to buy any such securities. An investment in any strategy, including the strategy described herein, involves a high degree of risk. Past performance of these strategies is not necessarily indicative of future results. There is the possibility of loss and all investment involves risk including the loss of principal.

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